A flashing economic warning and a sharp political jolt

President Donald Trump listens during a Cabinet meeting at the White House in Washington on Wednesday, April 30, 2025. The report that the economy contracted in the first quarter underscored how much President Trump has at risk as he pursues an aggressive trade war. (Pete Marovich/The New York Times)

By David E. Sanger

President Donald Trump took office 101 days ago after a campaign in which voters bought his argument that he could skillfully manage the economy and that his policy prescriptions could both bolster growth and eradicate inflation.

So the news on Wednesday that the nation’s gross domestic product had contracted in the first three months of the year was a sharp political jolt as well as a blinking economic warning.

It came at the end of a quarter in which stock prices were down sharply, Wall Street’s worst performance at the start of a new presidential term since Gerald Ford tried to steer the country out of scandal and inflation 51 years ago. And it only added to the widespread uncertainty among businesses and consumers about what the rest of the year might hold as Trump pursues a trade war that is already choking off supply chains and threatening to push prices up and lead to shortages of critical components and products on shelves.

It is too soon to predict where the American economy is headed for the rest of the year, and Trump remains insistent that he will produce a flurry of trade deals that will bring manufacturing back to the United States and usher in a new age of prosperity.

But the first-quarter figures brought the political risks for him into focus. For Trump, what is at stake is a question of fundamental competence on an issue that he has always used to define himself.

If the report proves to be a harbinger of an extended slowdown or recession, the situation could become the economic analog of President Joe Biden’s fumbled withdrawal from Afghanistan four years ago this summer. Biden’s job approval ratings never recovered from that early debacle. Nothing he did later — not the millions of jobs created, not the big legislative victories, not the rapid response to Russia’s invasion of Ukraine — could restore the sense among voters that he could be trusted to carry out the job with the skill they assumed he brought to it.

Trump stood in the Rose Garden on April 2, what he called “liberation day,” and rolled out a broad and punitive set of tariffs on trading partners. He has promised that other countries will come begging for a deal to roll back those levies and other tariffs he has imposed.

A substantial number of Americans appear skeptical. In a New York Times/Siena College poll last week, 55% disapproved of Trump’s handling of the economy, with 43% approving. About half of voters disapproved of Trump’s handling of trade.

Some of Trump’s economic advisers now recognize that the timing and execution of his tariff announcements could prove to be colossal mistakes, even if they applaud the underlying strategy. That is why, every few days, they are announcing new exceptions, most recently to relieve the pain for American carmakers.

“On April 2, standing in arguably the most powerful place in the world, President Trump thought he was projecting American strength,” said Matthew P. Goodman, who runs the geoeconomics center at the Council on Foreign Relations and served under Presidents George W. Bush and Barack Obama. “But he discovered that trade is complicated, that you need to be more surgical, and he has had to tack back from that ever since.”

Trump, a billionaire real estate investor, has acknowledged that his strategy will bring some temporary pain to Americans, but seemed to argue on Wednesday that it would hardly be noticed by ordinary Americans, at least at toy stores.

“Well, maybe the children will have two dolls instead of 30 dolls, you know?” he said. “And maybe the two dolls will cost a couple of bucks more than they would normally.”

Whatever the cost of a Barbie, Trump is facing a fundamental timing problem. It will take years for the huge investments he predicts will flow into the United States to unfold and bring about the industrial renaissance he has promised. Building the most cutting-edge semiconductor fabrication plant, for example, can easily take five years.

But the economic pain of the tariffs could start within months, with upward pressure on prices and shortages of both industrial and consumer products made abroad.

Much of Trump’s political problem lies in that disconnect. For many of the products Americans will be paying more for — especially Chinese-made products — there is no American alternative. And for many more, producing them in the United States may make no sense.

Trump may score some early wins. Treasury Secretary Scott Bessent said Tuesday that “we are very close on India.” He added that South Korea was “sending its A-team” to negotiate and that a deal was also possible soon with Japan. Trump said Wednesday that Canada’s new prime minister, Mark Carney, had called him the day before and said, “‘Let’s make a deal.’”

Perhaps so, but Carney also had this to say Tuesday after winning the Canadian election: “Our old relationship with the United States, a relationship based on steadily increasing integration, is over. The system of open global trade anchored by the United States, a system that Canada has relied on since the Second World War, a system that, while not perfect, has helped deliver prosperity for a country for decades, is over.”

Carney has vowed to reduce Canada’s dependence on its huge neighbor, no easy assignment since bilateral trade amounts to about a fifth of the country’s economy. China, the most powerful player in Trump’s trade wars, has been pursuing a similar strategy. And its leader, Xi Jinping, has every incentive to make the next few months as politically painful for Trump as possible.

Xi has largely maintained radio silence since Trump announced an escalating set of tariffs on Chinese goods, settling at 145% after several angry moves and countermoves with Beijing. That rate is so high that it essentially freezes trade; already there are reports of freighters loaded with goods that are being turned around, so that importers do not have to pay those tariffs.

Trump’s bet is that Xi will blink first because the pain for the Chinese economy will be so great that he will have to strike an accommodation that will, over time, allow the United States to get back to something approaching normal. Xi is betting the opposite: that Trump has overreached, and can’t withstand bad GDP numbers, rising inflation or plummeting polls.

Only one of them is right.